chap 7 accounting

Marla's Publishing Service has $4,800 of fixed expenses. The manager reported the company's operating income as $0, and the contribution margin was 45%. What are the company's sales in dollars, rounding to the nearest dollar, using the shortcut approach to the contribution margin ratio?

$10,667

The manager at Vertical Wire Productions reported total sales revenue of $800,000. The variable expenses were $600,000, and there were $125,000 of total fixed expenses. Use the contribution margin shortcut formula to predict the breakeven point in dollars.

$500,000

Terry's Frame & Art Shoppe produces and sells picture frames to clients at $8.00 per picture frame. The variable cost to produce each picture frame is $3.25. The fixed costs are $3,000 per month. What is the firm's contribution margin per picture frame?

$8.00-$3.25=$4.75

Terry's Frame & Art Shoppe produces and sells picture frames to clients at $8.00 per picture frame. The variable cost to produce each picture frame is $3.25 per picture frame. The fixed costs are $3,000 per month. What is the firm's contribution margin ratio?

$8.00-$3.25=$4.75 $4.75/$8.00= 59.37%

Landstown College changed the budget for the next fiscal year. The new budget includes the following: Total fixed expenses $52,000 Selling price per unit $58 Variable expenses per unit $32 What is the impact on the breakeven sales in units if the new manager reduces fixed expenses by $10,000?

385 decrease in breakeven units

The Beach Sea Shop has variable expenses of 35% of sales. The manager reported monthly fixed expenses of $250,000. The monthly target operating income is $65,000. What is Beach Sea Shop's operating leverage factor at the target level of operating income?

4.85

Which of the following is NOT correct about changes in variable and fixed costs? A.Variable and fixed costs will not change with changes in unit sales prices. B.A change in fixed costs does not affect the contribution margin. C.Lower variable costs increase the contribution margin and lower the breakeven point. D.Lower variable costs decrease the contribution margin and lower the breakeven point.

D.Lower variable costs decrease the contribution margin and lower the breakeven point.

The contribution margin ________.

is the excess of sales revenue over variable expenses

The ________ is the excess of actual or expected sales over breakeven sales.

margin of safety

The Heart Foundation is a charity that produces and sells two products, red hearts and purple hearts, to promote health in the community. The manager estimates clients will purchase 2,400 red hearts and 1,100 purple hearts by the end of the next period. The unit contribution margins for red hearts and purple hearts are $2.75 and $3.40. What is the weighted-average unit contribution margin?

$2.95

The Landscape Company produces and sells large and medium landscaping tiles. The large landscaping tiles sell for $90 per unit with variable costs of $30 per unit. The medium landscaping tiles sell for $60 per unit with variable costs of $30 per unit. The total fixed costs for the company is $42,000. The Landscape Company usually sells three large tiles for every two medium tiles. What is the breakeven point in units?

875 Units

Which of the following statements is TRUE about sensitivity analysis? A.A manager uses sensitivity analysis to determine the impact of changes to the sales price and volume. B.A manager does NOT use CVP analysis to conduct sensitivity analysis. C.Sensitivity analysis never helps a manager to determine scenarios about what results might occur if actual prices change. D.A manager can use sensitivity analysis to assess the behavioral traits of employees through direct observation.

A. A manager uses sensitivity analysis to determine the impact of changes to the sales price and volume.

Which of the following is NOT true about the breakeven point? A.Total revenues equal total expenses at the breakeven point. B.It is the sales level at which operating income is never zero. C.Sales below the breakeven point result in a loss. D.Sales above the breakeven point provide a profit.

B.It is the sales level at which operating income is never zero.

CVP graph

Step 2 of the CVP graph represents the fixed expense line. Step 3 of the CVP graph represents the total expense line Step 4 of the CVP graph represents the breakeven point. Step 5 of the CVP graph represents operating income and the operating loss areas

Step 4 of the CVP graph represents the ________.

breakeven point

The operating leverage ________.

refers to a company's amount of relative fixed and variable costs